The Top Reasons for Business Failures

Every year, thousands of businesses fail. While business failures know no size boundaries, the majority are small businesses.  

Starting a business is easy. Making it successful and lasting is not easy. It takes paying attention to what is happening and making adjustments along the way. But, too many business owners are far too busy dealing with day-to-day operations rather than building and implementing a strategy to grow and sustain their business.

When a business fails, it is due to factors that build up over time. Rarely does a problem occur that causes a business to fail suddenly. Most business failures happen because of internal failures, not external factors such as competition or economic conditions. Here are the most common reasons for business failures:

Operational Management

  • Inability to reach decisions and act on them
  • Failure to keep pace with management systems
  • Poor personnel relations
  • Loss of key personnel
  • Lack of or inadequate staff training
  • Poor relations with suppliers
  • Loss of control through creditors' demands
  • Inadequate insurance
  • Reluctance to seek professional assistance
  • Lack of quality processes

Finance

  • Growth without adequate capitalisation
  • Ignoring adverse financial data
  • Inadequate financial records
  • Poor control of receivables
  • Poor or lack of forecasting
  • Extending too much credit and poor credit control
  • Loose control of liquid assets
  • Insufficient working capital
  • Over-borrowing or using too much credit
  • Inefficient cost and quality controls
  • Poor pricing strategies
  • Failure to minimize taxation through tax planning

Sales and Marketing

  • Loss of impetus in sales
  • Poor customer relations
  • Inability to cope adequately with competition
  • Competition ignored due to complacency
  • Failure to anticipate market trends
  • Failure to promote and maintain a favourable public image
  • Failure to manage sales personnel
  

Top Reasons for Business Success

Thinking, Planning, and Acting.

Focusing your attention on products, services, employees, customers, and markets by continuously cutting costs, creating products, improving quality, training employees, pleasing customers, and developing new markets.

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